Guidelines to securing a home loan

Many young South Africans are working hard to achieve their dream of purchasing their first home. However, the process can be challenging due to the daunting application process, which can take up to 2 years and is often enough to discourage prospective buyers.

Mike Greeff CEO of Greeff Christie’s International Real Estate says, “Planning to purchase a home is paramount to ensuring you get the best results. Thorough planning and the implementation of the below guidelines are sure to make the application process that much easier.”

Saving for a deposit: 

Deposit amounts on home loans usually start from the minimum of 10% of the purchase value of the property and has a two-fold benefit: reducing your monthly bond repayment amount as well as increasing your affordability score with banks. The more substantial your deposit, the better your chances of being granted a home loan. Having a healthy deposit shows lenders that you have the discipline to save and that you are committed to the buying process. A good deposit also puts you in a better position to negotiate your interest rate with the bank. Even a small reduction can result in a saving of thousands over the duration of the loan-term.

Checking your credit score: 

Credit scores are a three-digit number, often ranging from 300 to 850, with 300 being the lowest credit score and 850 the highest. The higher your credit score, the better your credit is. A good credit status can help improve your chances of being approved for a home loan. A poor credit score reduces the chances and, if a loan is granted, it is likely to be on unfavourable interest rates. Resulting in higher interest rates and longer payment terms, which cost more in the long run. 

A poor credit record is extremely difficult to correct and may take a long time to remedy. A solution would be to clear as much debt as possible. Paying off debt from items purchased on store credit accounts or microloans will have a positive effect on your credit score.

Budget and affordability:

Determining your affordability allows you to see what you can afford to repay every month and is sometimes the necessary dose of reality that is required when buying a home. While just being able to afford the repayment makes mathematical sense there are almost always unforeseen expenses that may eat into your budget for the month. Taxes, levies, rates and other related fees need to be factored in to the repayment, which will help buyers avoid wasting time looking at unsuitable properties.

Obtaining a prequalification:

A prequalification certificate is valid for 90 days and indicates how much you qualify to spend on a house. Being certified can make or break the seller's decision to accept your offer or not. “We exclusively make use of our bond originators who are fully equipped to obtain your credit score as well as a prequalification certificate. At no cost, our agents will provide buyers with the best options major banks have on offer, saving you time and a substantial amount of money in the process,” says Greeff.

The two benefits are that you will know what your budget and affordability for a property are, and you will be able to show the seller or estate agent that you are a serious buyer. It provides peace of mind to both buyer and seller and allows the buyer to get a feel for the application process, which entails sourcing all the relevant documents required by the bank.

Additional costs:

Buyers should also be very cognisant of additional costs that will arise during the purchase process. Transfer fees or costs cover the transfer of the property to the deeds office, from the seller’s name to the buyer’s name. Buyers will also be liable for the registration costs of the bond. Apart from your monthly bond instalments, there are additional costs to keep in mind such as levies, maintenance, etc.

“Applying for a home loan need not be as daunting as it seems. By employing a systematic and logical approach to the application process there is no reason why you could not be one step closer to receiving a favourable result,” adds Greeff.
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